Discount brokers race ahead of other players

Mumbai: Discount equity brokers are overtaking the traditional equity brokers, as competition has intensified in the broking industry. Bengaluru-based Zerodha has become the top equity broker in the country in terms of the number of active clients, dethroning ICICI Securities.

HDFC Securities, Share-khan and Kotak Securities are ranked as the third, fourth and fifth largest brokerags, according to NSE client data.

"Three out of top ten brokers by active customers have started offering broking at discounted charges and with Zerodha occupying the first slot it seems that the industry is moving the discount broking way," Madhukar Ladha and Keshav Binani, Analysts at HDFC Securities, said.

The financial performance of the sector is expected to remain under stress as traditional brokers like Axis Securities and Angel Broking have moved to fixed/subscription based business models. We believe this can lead to further decline in yields, HDFC Securities said.

Also, the rising share of derivatives volume in the mix and a fall in the share of delivery-based volumes have contributed to a decline in blended yields for most brokerages, HDFC Securities said.

"Competitive environment continues to remain tough for brokers with many leading names —Axis Securities, Angel Broking and Sharekhan—moving to the fixed/subscription pricing model while discount brokers continue to charge ahead," analysts from HDFC Securities said.

Zerodha added 70,000 clients in the April-June 2019 quarter, taking the discount broking firm to the number one position with a client base of 9,79,241, moving ahead of ICICI Securities, the active client base of which now stands at number two position with 8,78,884 clients.

"Another discount broker Upstox, earlier RKSV, has been growing at the fastest pace. The company has added 86,000 customers in the last quarter. Even in FY19 it more than doubled its customer base from 44,000 customers in FY18 to 1,00,000 customers in FY19," HDFC Securities said.

Traditional brokers are finding it tough to compete with the discount brokers even after reducing the brokerage rates.

Despite the launch of discount broking schemes Axis Securities’ active customer base dropped by 30,000 quarter-on-quarter to 3,89,000 as on June 30, 2019. ICICI Securities added 35,000 customers while Angel Broking added 14,000 customers in the April-June quarter.